Mayor Ed Lee knew two years ago that the San Francisco Housing Authority under Director Henry Alvarez had such entrenched problems that it needed outside help - and as city administrator sent his own staff in to bolster the agency.

Yet many of those same problems have surfaced again - with dozens of employees meeting with top mayoral officials to complain about Alvarez's alleged bullying and intimidation as well as about major maintenance problems at public housing units. Three department employees have filed lawsuits against Alvarez and the Housing Authority.

Lee now admits he knew about Alvarez's history, including three lawsuits filed against him in Oregon and a grievance filed in San Antonio, Texas. In the grievance, an employee said Alvarez had threatened to strangle her.

But Lee is still standing by his man, a position that some legal experts say could make the city liable.

Lee has met with Alvarez twice since the allegations surfaced last week, but says he has not raised the idea of Alvarez's taking a leave of absence while an investigation by former City Attorney Louise Renne plays out.

"We did not get into personnel matters to that extent," Lee said. "I did let him know that the Housing Authority board and its attorneys were going to be looking at all of these allegations. I do take them seriously."

Lee said he is confident Alvarez can lead the agency in the meantime, and that he will continue to monitor the situation.

Earlier complaints

Problems with Alvarez's leadership style were presented to Lee two years ago, when as city administrator Lee appointed a team of his employees led by Steve Nakajima of the General Services Administration to help the Housing Authority settle expired labor contracts and make other improvements.

Several Housing Authority employees at the time sent City Hall anonymous letters describing a host of problems at the agency, including rampant nepotism in hiring, random firing of employees and Alvarez's "uncontrolled outbursts" at staff.

Lee said the complaint letters weren't the reason that he had involved his office. Instead, he said, he provided help as "a continued offer of a certain level of service and support."

"They did quite a bit of reconnaissance and met with senior staff about the authority a number of times over a period of many months," Dennis said. "Mr. Alvarez has always wanted to identify opportunities to improve."

An employee who didn't want to be named for fear of retribution said unions had complained to City Hall because Alvarez wasn't able to settle a host of labor contracts due to his unwillingness to compromise. The employee said Lee's team had helped settle the negotiations quickly.

The involvement of Lee's team culminated in a May 2011 town hall meeting at the Scottish Rite Masonic Center on 19th Avenue, where employees were given free breakfast and Alvarez took prescreened written questions from them. But several employees said conditions at the agency have only deteriorated since then.

Formal grievance

Critics of Alvarez's say that shouldn't be a surprise considering his history. The Chronicle obtained the grievance report filed by Deborah Flach, who was senior vice president for operations at the San Antonio Housing Authority under Alvarez.

She wrote that in October 2007, she'd received what she considered good news about one of the agency's homeownership programs, but when she relayed it to Alvarez, he "proceeded to express anger, outrage and hostility." He suggested she was "crazy" and said if she didn't stop talking up the program, "he was going to strangle me and motioned to do so."

During meetings with staff in San Antonio, Flach wrote, Alvarez would make comments such as, "I don't forgive anyone; someone else does that."

The agency brought in an independent investigator to assess the incident, resulting in a letter of reprimand warning Alvarez that he could lose his job if the behavior didn't stop.

Dennis said Alvarez had no comment about the incident. Lee said he knew about the incident when he led the team to find a Housing Authority director in 2008. Then-Mayor Gavin Newsom said the same.

"I do recall the issue in San Antonio and discussed that extensively," Newsom said in a text message. "We all agreed to move forward."

Lee acknowledged this week that he knew about the three lawsuits filed against Alvarez in Oregon, where he worked before San Antonio. His spokeswoman said last week the mayor "didn't recall being made aware of cases like that."

Former employees accused Alvarez and his colleagues of discrimination or retaliation. One case led to a $236,000 settlement for a former employee, another was dropped, and Alvarez and the county that he worked for won the third. Newsom said he hadn't known about the Oregon cases when he hired Alvarez.

Ivo Labar is the attorney for Tim Larsen, a San Francisco Housing Authority lawyer who is suing the agency and Alvarez for allegedly using racist language against him, threatening to throw him out a window and trying to fire him after he took his complaints to the mayor's office.

Labar said he will file an amended complaint next week and may add the city as a defendant.

"That's certainly something we're looking into," Labar said.

A liability?

Peter Keane, a law professor at Golden Gate University, said the city could be liable if it can be shown that "reasonable people" would not have hired Alvarez because of his past problems.

"If it would have been foreseeable that these kinds of difficulties would occur, there would be people harmed and there would be damages, the city's on the hook for it," Keane said.

Lee's decision to keep Alvarez in his position could prove even more problematic, Keane said.

"Now at this point, if other mistakes are made or other derelictions are done by him, then the negligence of the city in continuing to keep him is compounded," Keane said.

However, former Supervisor Angela Alioto, an attorney who specializes in discrimination cases, said it was unclear if the city had opened itself up to liability.

"What they did due diligence-wise makes all the difference," she said. "It sounds to me like he has a rough personality, which is not illegal. Discriminating against someone is."

Mirian Saez served as the interim director of the Housing Authority before Alvarez's hiring and helped choose him for the post. She said Alvarez's background in Oregon and Texas was known before he was hired.

"A thorough background check was conducted," Saez said.

Saez praised Alvarez's performance in San Francisco, saying, "There's been some real progress on the financial standing of the agency, the future redevelopment plans of the agency and its current mission.

"Lots of positive things have taken place over the last four years," she said.